VAN KAMPEN MERRITT STRATEGIC SECTOR MUNICIPAL TRUST, N-30D, 1995-12-28

VAN KAMPEN MERRITT STRATEGIC SECTOR MUNICIPAL TRUST
N-30D, 1995-12-28

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Table of Contents
<S> <C>
Letter to Shareholders................. 1
Performance Results.................... 3
Portfolio of Investments............... 4
Statement of Assets and Liabilities.... 9
Statement of Operations................ 10
Statement of Changes in Net Assets..... 11
Financial Highlights................... 12
Notes to Financial Statements.......... 13
Independent Auditors' Report........... 17
Dividend Reinvestment Plan............. 18

</TABLE>

Letter to Shareholders

November 22, 1995

Dear Shareholder:
The first ten months of 1995 have been very positive for most investors. Both
the fixed-income and equity markets have made considerable gains during the
period ended October 31, 1995.
This year serves as a reminder of just how quickly markets can move and how
difficult it can be to predict the timing of those movements. Moreover, this
year reinforces the importance of maintaining a long-term perspective and
reaffirms the principle that it is time---not timing---that leads to
investment success.

[PHOTO]
Dennis J. McDonnell and Don G. Powell

Economic Overview

Although the third quarter posted a stronger-than-expected annual gross
domestic product growth rate of 4.2 percent, the economy has slowed
significantly this year. This slowdown is due in large part to the Federal
Reserve Board's efforts to tighten monetary supply in 1994 -- a measure that
proved successful, as economic growth during the first half of 1995 was
substantially lower than its fourth quarter 1994 rate of 5.1 percent.
And, while other key economic data have shown mixed signs during recent months,
the general economic trends for the year continue to support a "soft landing"
scenario.
Comfortable with the economy's rate of growth and level of inflation, the Fed
reversed its trend of raising interest rates and lowered short-term rates by a
quarter percent on July 6. With slowing growth, interest rates declined and the
value of many fixed-income investments rose (bond yields and prices move in
opposite directions).

Performance Summary

The Trust produced a tax-exempt distribution of 6.82 percent <F3>, based
on the closing stock price of $11.875 per common share on October 31, 1995.
Because income from the Trust is exempt from federal income tax, it is
important to compare the Trust's distribution rate to an equivalent taxable
rate. For example, for investors in the 36 percent federal income tax
bracket, the Trust's distribution rate represents a yield equivalent to a
taxable investment earning 10.66 percent <F4>. In fact, many closed-end
municipal bond funds, such as your investment, are currently offering higher
yields (after taxes) over many income alternatives.
As the graph on the following page shows, the Trust's net asset value and
market price have made significant gains over the one-year period. The Trust's
closing stock price, for example, gained 10.5 percent from October 1994 to
October 1995. Moreover, we are pleased to report the Trust generated a one-year
total return at market price of 18.79 percent <F1>, which includes reinvestment
of dividends for the period ended October 31, 1995.

1 (Continued on page two)

Economic Outlook

We believe the Fed will move cautiously before it continues to lower
short-term rates, waiting for key indicators to show that the economy has truly
settled into a slow growth pattern. Although current economic data continues to
send mixed signals, we anticipate the economy will grow at an annual rate of 3
percent in the fourth quarter and inflation will run under 3 percent.
Based upon a generally modest growth and low inflation outlook, we believe the
outlook for fixed-income markets is positive. As interest rates fall in response
to a slowing economy, we believe yields on short term municipal bonds will
continue to move significantly lower than long-term municipal bonds. Lower
short-term rates typically translate into lower leveraging costs for the Trust,
which provides increased opportunities for higher earnings over time.
Additionally, a steepening of the municipal yield curve would likely increase
investor demand for long-term municipal bonds and help to boost market prices.
Long-term municipal bond prices will also benefit from the combination of low
supply of new municipal bond issues and increased demand driven by scheduled
bond maturities.

[GRAPH]

Market
Date NAV Price

31-Oct-94 12.28 10.750
30-Nov-94 11.68 11.250
31-Dec-94 12.26 10.875
31-Jan-95 12.78 11.750
28-Feb-95 13.50 12.375
31-Mar-95 13.47 12.250
30-Apr-95 13.31 12.250
31-May-95 13.74 11.750
30-Jun-95 13.33 11.625
31-Jul-95 13.45 11.625
31-Aug-95 13.52 11.625
30-Sep-95 13.54 11.625
31-Oct-95 13.72 11.875

Based on month-end prices

While there has been varied speculation about the impact of tax reform, no one
is certain about what will finally happen. Consequently, in the near term, the
municipal market may continue to experience periodic market fluctuations as
various proposals come to the forefront. However, in the long term, we believe
the municipal market will remain an attractive investment choice for investors
seeking high current income. We will continue to keep a close watch over any new
developments and evaluate the potential impact they may have on your investment
in the Trust.
Once again, thank you for your continued confidence in your investment with
Van Kampen American Capital and for the privilege of working with you in seeking
to reach your financial goals.

Sincerely,

Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen American Capital Van Kampen American Capital
Investment Advisory Corp. Investment Advisory Corp.

Performance Results for the Period Ended October 31, 1995

Van Kampen Merritt Strategic Sector Municipal Trust
(NYSE Ticker Symbol VKS)

- -----------------------------------------------------------------------------------------------
<S> <C>
Total Returns
One-year total return based on market price<F1>........................................ 18.79%
One-year total return based on NAV<F2>................................................. 19.39%

Distribution Rates
Distribution rate as a % of initial offer common stock price<F3>....................... 5.40%
Taxable-equivalent distribution rate as a % of initial offer common stock price<F4>.... 8.44%
Distribution rate as a % of closing common stock price<F3>............................. 6.82%
Taxable-equivalent distribution rate as a % of closing common stock price<F4>.......... 10.66%

Share Valuations
Net asset value........................................................................ $ 13.72
Closing common stock price............................................................. $11.875
One-year high common stock price (04/27/95)............................................ $12.750
One-year low common stock price (11/14/94)............................................. $ 9.875
Preferred share (Series A) rate<F5>.................................................... 3.740%
Preferred share (Series B) rate<F5>.................................................... 3.749%

<FN>
<F1> Total return based on market price assumes an investment at the market price at
the beginning of the period indicated, reinvestment of all distributions for the
period in accordance with the Trust's dividend reinvestment plan, and sale of
all shares at the closing stock price at the end of the period indicated.

<F2> Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.

<F3> Distribution rate represents the monthly annualized distributions of the Trust
at the end of the period and not the earnings of the Trust.

<F4> The taxable-equivalent distribution rate is calculated assuming a 36% federal
tax bracket.

<F5> See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.

A portion of the interest income may be taxable for those investors subject
to the federal alternative minimum tax (AMT).

Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.

</TABLE>

Portfolio of Investments

California 13.8%
3,330 Anaheim, CA Ctfs Partn Anaheim Mem Hosp Assoc Rfdg
(AMBAC Insd) .......................................... 5.000 05/15/13 3,078,785
3,000 California Hlth Fac Fin Auth Rev Kaiser Permanente Med
Cent .................................................. 5.450 10/01/13 2,862,900
6,420 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Pacific Gas & Elec Co Ser B (MBIA Insd) ............... 6.350 06/01/09 6,869,593
10,000 California Statewide Cmntys Dev Auth Rev Ctfs Partn
Insd Childrens Hosp Rfdg (MBIA Insd) .................. 4.750 06/01/21 8,555,200
2,000 Mount Diablo, CA Hosp Dist Rev Ser A (Embedded Cap)
(AMBAC Insd) .......................................... 5.125 12/01/23 1,794,000
3,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA Insd) ....... 6.000 06/01/08 3,172,800
4,880 Paramount, CA Redev Agy Tax Alloc Redev Proj Area No 1
Rfdg (MBIA Insd) ...................................... 6.250 08/01/23 5,071,003
2,000 San Francisco, CA City & Cnty Arpts Comm Intl Arpt Rev
2nd Ser Issue 8A (FGIC Insd) .......................... 6.250 05/01/20 2,065,760
------------
33,470,041
------------

Colorado 6.4%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev E-470
Proj Ser B ............................................ 7.000 08/31/26 1,058,610
2,000 Colorado Hsg Fin Auth Multi Family Hsg Insd Mtg Ser A.. 6.800 10/01/37 2,049,300
5,845 Colorado Hsg Fin Auth Single Family Pgm Sr Ser F ...... 8.625 06/01/25 6,763,191
3,415 Denver, CO City & Cnty Arpt Rev Ser B ................. 6.900 11/15/00 3,674,062
2,000 Denver, CO City & Cnty Arpt Rev Ser B (MBIA Insd) ..... 5.750 11/15/17 1,952,380
------------
15,497,543
------------

Georgia 2.7%
3,000 Atlanta, GA Spl Purp Fac Rev Delta Airls Ser B ........ 7.900 12/01/18 3,200,040
1,425 Georgia Muni Elec Auth Pwr Rev Ser A Rfdg (FGIC Insd).. 5.500 01/01/12 1,422,620
2,000 Georgia Muni Elec Auth Pwr Rev Ser Z Rfdg (FGIC Insd).. 5.500 01/01/12 2,005,160
------------
6,627,820
------------
</TABLE>

4 See Notes to Financial Statements

Portfolio of Investments (Continued)

October 31, 1995
- --------------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois 4.1%
$ 4,500 Chicago, IL O'Hare Intl Arpt Spl Fac Rev
American Airls Inc Proj Ser A ................... 7.875% 11/01/25 $ 4,833,900
3,500 Chicago, IL O'Hare Intl Arpt Spl Fac Rev Intl
Terminal (MBIA Insd) ............................ 6.750 01/01/12 3,740,485
1,285 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United
Airls Inc Proj Ser 84C .......................... 8.200 05/01/18 1,409,118
------------
9,983,503
------------

Indiana 2.7%
3,000 Kokomo, IN Hosp Auth Hosp Rev Saint Joseph Hosp
& Hlth Cent Rfdg ................................ 6.000 08/15/02 3,043,050
2,000 Kokomo, IN Hosp Auth Hosp Rev Saint Joseph Hosp
& Hlth Cent Rfdg ................................ 6.250 08/15/05 2,076,880
990 La Porte Cnty, IN Hosp Auth Hosp Fac Rev La
Porte Hosp Inc Rfdg ............................. 5.900 03/01/01 1,001,623
540 La Porte Cnty, IN Hosp Auth Hosp Fac Rev La
Porte Hosp Inc Rfdg ............................. 6.000 03/01/02 547,317
------------
6,668,870
------------

Iowa 2.1%
5,000 Muscatine, IA Elec Rev Rfdg (AMBAC Insd) ........ 6.125 01/01/12 5,181,300
------------

Kansas 2.3%
5,000 Burlington, KS Pollutn Ctl Rev KS Gas & Elec Co
Proj Rfdg (MBIA Insd) ........................... 7.000 06/01/31 5,561,450
------------

Kentucky 1.8%
4,020 Louisville, KY Hsg Assistance Corp Mtg Rev
Carrousel Pptys Ser A Rfdg (FHA Gtd) ............ 8.300 07/01/24 4,407,528
------------

Louisiana 1.0%
2,250 Saint Charles Parish, LA Pollutn Ctl Rev LA Pwr
& Lt Co Proj (FSA Insd) ......................... 7.500 06/01/21 2,534,558
------------

Maine 0.1%
150 Maine St Hsg Auth Mtg Purp Ser A6 ............... 6.350 11/15/22 149,610
------------

Maryland 5.7%
2,000 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty Dev
Rev Single Family Pgm Seventh Ser ............... 7.300 04/01/25 2,125,800
6,325 Maryland St Hlth & Higher Edl Fac Auth Rev
Greater Baltimore Med Cent Rfdg (FGIC Insd) ..... 5.000 07/01/13 5,905,652
6,270 Maryland St Hlth & Higher Edl Fac Auth Rev Subn
Hosp Rfdg (AMBAC Insd) .......................... 5.000 07/01/13 5,854,299
------------
13,885,751
------------

Massachusetts 3.2%
1,775 Massachusetts Muni Whsl Elec Co Pwr Supply Sys
Rev Ser B Rfdg .................................. 6.750 07/01/05 1,959,209
1,500 Massachusetts St Hlth & Edl Fac Auth Rev Cent
New England Hlth Sys Ser A ...................... 6.125 08/01/13 1,369,005

</TABLE>

5 See Notes to Financial Statements

Portfolio of Investments (Continued)

October 31, 1995
- --------------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts (Continued)
$ 2,500 Massachusetts St Hlth & Edl Fac Auth Rev North Shore
Med Cent Ser A (MBIA Insd) ............................. 5.625% 07/01/14 $ 2,474,150
1,705 Massachusetts St Hlth & Edl Fac Auth Rev Vly Regional
Hlth Sys Ser C Rfdg (Connie Lee Insd) <F2> ............. 7.000 07/01/09 1,956,300
------------
7,758,664
------------

Michigan 1.1%
2,745 Michigan Muni Bond Auth Rev St Revolving Fd ............ 5.400 10/01/14 2,692,296
------------
Mississippi 0.7%
1,500 Mississippi Home Corp Single Family Rev Ser D (GNMA
Collateralized) ........................................ 8.100 12/01/24 1,687,785
------------

Nevada 2.0%
2,000 Clark Cnty, NV Passenger Fac Las Vegas Macarran Intl
Arpt (MBIA Insd) ....................................... 5.750 07/01/23 1,926,200
2,700 Nevada Hsg Div Single Family Pgm Ser E (FHA Gtd) ....... 6.900 10/01/11 2,820,096
------------
4,746,296
------------

New Jersey 5.7%
2,000 New Jersey Econ Dev Auth Dist Heating & Cooling Rev
Trigen Trenton Ser A ................................... 6.200 12/01/10 2,028,300
10,000 New Jersey Econ Dev Auth Wtr Fac Rev NJ American Wtr
Co Inc Proj Ser A (FGIC Insd) .......................... 6.875 11/01/34 10,827,200
1,000 Union Cnty, NJ Util Auth Solid Waste Rev Ser A ......... 7.200 06/15/14 1,052,960
------------
13,908,460
------------

New York 16.2%
1,615 New York City Muni Wtr Fin Auth Wtr & Swr Sys Rev Ser
A (FGIC Insd) .......................................... 6.750 06/15/14 1,750,353
2,520 New York City Ser B .................................... 7.250 08/15/19 2,744,709
2,000 New York City Ser B Rfdg ............................... 6.375 08/01/12 2,054,000
5,000 New York City Ser C .................................... 7.000 08/15/16 5,326,250
5,965 New York City Ser C .................................... 7.250 08/15/24 6,334,830
4,355 New York St Dorm Auth Rev Court Fac Lease Ser A ........ 5.500 05/15/10 4,180,234
3,200 New York St Environmental Fac Corp Wtr Fac Rev
Jamaica Wtr Supply Province (AMBAC Insd) ............... 7.625 04/01/29 3,517,344
1,920 New York St Med Care Fac Fin Agy Rev Mental Hlth Svcs
Fac Impt Ser B ......................................... 7.625 08/15/17 2,128,070
3,000 New York St Pwr Auth Rev & Genl Purp Ser Y ............. 6.750 01/01/18 3,257,610
3,750 New York St Pwr Auth Rev & Genl Purp Ser Z Rfdg ........ 6.500 01/01/19 4,002,600
4,350 Triborough Brdg & Tunl Auth NY Rev Genl Purp Ser A Rfdg. 5.000 01/01/12 4,089,870
------------
39,385,870
------------

</TABLE>

6 See Notes to Financial Statements

Portfolio of Investments (Continued)

October 31, 1995
- --------------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Carolina 3.2%
$ 1,845 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev Ser A Rfdg 7.500% 01/01/10 $ 2,092,175
5,800 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev Ser B Rfdg
(Embedded Cap) .......................................... 6.000 01/01/14 5,697,166
------------
7,789,341
------------

Ohio 0.4%
1,000 Delaware Cnty, OH Hlth Care Fac Rev Mtg FHA Centrum at
Willow Brk (FHA Gtd) .................................... 6.550 02/01/35 1,029,620
------------

Oklahoma 1.1%
2,750 Shawnee, OK Hosp Auth Hosp Rev Midamerica Hlthcare Inc
Rfdg .................................................... 6.125 10/01/14 2,604,167
------------

Pennsylvania 8.0%
3,000 Butler Cnty, PA Hosp Auth Hosp Rev North Hills Passavant
Hosp Ser A (Cap Guar Insd) .............................. 6.900 06/01/09 3,316,230
6,000 Pennsylvania Intergovtl Coop Auth Spl Tax Rev City of
Philadelphia Fdg Pgm (FGIC Insd) ........................ 5.350 06/15/07 6,072,600
10,000 Pennsylvania St Ctfs Partn Ser A Rfdg (AMBAC Insd) ...... 5.400 07/01/09 10,055,300
------------
19,444,130
------------

South Carolina 0.9%
2,000 South Carolina St Port Auth Port Rev (AMBAC Insd) ....... 6.750 07/01/21 2,139,920
------------

Texas 5.4%
250 Brazos Cnty, TX Hlth Fac Dev Corp Franciscan Svcs Rev
Saint Joseph Hosp & Hlth Cent Ser B Rfdg ................ 6.000 01/01/19 240,310
3,500 Brazos River Auth TX Pollutn Ctl Rev Coll TX Utils Elec
Co Proj A ............................................... 7.875 03/01/21 3,895,640
3,000 Harris Cnty, TX Toll Road Sr Lien Rfdg (AMBAC Insd) ..... 4.950 08/15/06 2,999,790
3,190 San Antonio, TX Arpt Sys Rev Rfdg (AMBAC Insd) .......... 7.375 07/01/13 3,732,172
2,175 Texas Hsg Agy Residential Dev Rev Mtg Ser D (GNMA
Collateralized) ......................................... 8.400 01/01/21 2,314,157
------------
13,182,069
------------

Utah 1.3%
3,000 Salt Lake City, UT Arpt Rev Delta Airls Inc Proj ........ 7.900 06/01/17 3,201,630
------------

</TABLE>

7 See Notes to Financial Statements

Portfolio of Investments (Continued)

October 31, 1995
- --------------------------------------------------------------------------------------------------
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Washington 1.9%
$ 2,030 Washington St Pub Pwr Supply Sys Nuclear
Proj No 3 Rev Rfdg Ser C .............................. * % 07/01/13 $ 691,459
3,380 Washington St Pub Pwr Supply Sys Nuclear Rfdg Ser C.... * 07/01/15 994,193
3,000 Washington St Ser B ................................... 5.500 05/01/18 2,974,770
------------
4,660,422
------------

Wisconsin 1.2%
2,715 Wisconsin Hsg & Econ Dev Auth Homeownership
Rev Ser E (FHA Gtd) ................................... 8.000 03/01/21 2,852,107
------------
Total Long-Term Investments 96.9%
(Cost $222,114,633) <F1>........................................................... 235,691,401

Short-Term Investments at Amortized Cost 0.9%....................................... 2,300,000

Other Assets in Excess of Liabilities 2.2%.......................................... 5,298,354
------------
Net Assets 100%..................................................................... $ 243,289,755
=============
*Zero coupon bond

<FN>
<F1> At October 31, 1995, cost for federal income tax purposes is $222,114,633;
the aggregate gross unrealized appreciation is $14,016,058 and the
aggregate gross unrealized depreciation is $1,053,404, resulting in net
unrealized appreciation including futures transactions of $12,962,654.

<F2> Assets segregated as collateral for open futures transactions.

</TABLE>

The following table summarizes the portfolio composition at October 31, 1995,
based upon quality ratings issued by Standard & Poor's. For securities not rated
by Standard & Poor's, the Moody's rating is used.

<TABLE>
<CAPTION>
Portfolio Composition by Credit Quality
<S> <C>
AAA........................... 51.7%
AA............................ 16.8
A............................. 6.6
BBB........................... 18.6
BB............................ 6.3
======
100.0%
======
</TABLE>

The following schedule shows the breakdown of the Trust's long-term investments
by municipal securities market sector as of October 31, 1995.

<TABLE>
<CAPTION>
Municipal Securities Percentage of
Market Sector Long-Term Portfolio
<S> <C>
Healthcare.................... 20.6%
Retail/Wholesale Electric..... 20.4
General Obligation............ 13.3
Transportation................ 11.7
Housing....................... 10.6
Industrial Revenue............ 9.9
Other......................... 13.5
======
100.0%
======
</TABLE>

8 See Notes to Financial Statements

Statement of Assets and Liabilities

October 31, 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at Market Value (Cost $222,114,633) (Note 1)..................................... $ 235,691,401
Short-Term Investments (Note 1)............................................................... 2,300,000
Cash.......................................................................................... 170,415
Receivables:
Interest.................................................................................... 4,746,273
Investments Sold............................................................................ 1,105,024
Unamortized Organizational Expenses (Note 1).................................................. 17,805
---------------
Total Assets............................................................................. 244,030,918
---------------

Liabilities:
Payables:
Income Distributions - Common and Preferred Shares.......................................... 325,677
Investment Advisory Fee (Note 2)............................................................ 133,928
Margin on Futures (Note 4).................................................................. 56,250
Administrative Fee (Note 2)................................................................. 30,906
Accrued Expenses.............................................................................. 194,402
---------------
Total Liabilities........................................................................ 741,163
---------------
Net Assets.................................................................................... $ 243,289,755
===============

Net Assets Consist of:
Preferred Shares ($.01 par value, authorized 100,000,000 shares, 1,900 issued with
liquidation preference of $50,000 per share) (Note 5)....................................... $ 95,000,000
---------------
Common Shares ($.01 par value with an unlimited number of shares authorized,
10,806,700 shares issued and outstanding)................................................... 108,067
Paid in Surplus .............................................................................. 149,167,283
Net Unrealized Appreciation on Investments.................................................... 12,962,654
Accumulated Undistributed Net Investment Income............................................... 501,388
Accumulated Net Realized Loss on Investments.................................................. (14,449,637)
---------------
Net Assets Applicable to Common Shares................................................... 148,289,755
---------------
Net Assets.................................................................................... $ 243,289,755
===============

Net Asset Value Per Common Share ($148,289,755 divided by 10,806,700 shares outstanding)...... $ 13.72
===============
</TABLE>

9 See Notes to Financial Statements

Statement of Operations

For the Year Ended October 31, 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest...................................................................................... $ 14,901,358
----------------

Expenses:
Investment Advisory Fee (Note 2).............................................................. 1,538,827
Administrative Fee (Note 2)................................................................... 355,114
Preferred Share Maintenance (Note 5).......................................................... 266,959
Trustees Fees and Expenses (Note 2)........................................................... 30,837
Legal (Note 2)................................................................................ 30,425
Amortization of Organizational Expenses (Note 1).............................................. 7,997
Other......................................................................................... 273,935
----------------
Total Expenses................................................................................ 2,504,094
----------------
Net Investment Income......................................................................... $ 12,397,264
================

Realized and Unrealized Gain/Loss on Investments:
Realized Gain/Loss on Investments:
Proceeds from Sales........................................................................... $ 182,213,838
Cost of Securities Sold....................................................................... (188,323,826)
----------------
Net Realized Loss on Investments (Including realized loss on closed and expired option
and futures transactions of $18,240 and $4,128,870, respectively)............................. (6,109,988)
----------------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period....................................................................... (9,429,057)
End of the Period (Including unrealized depreciation on futures transactions of $614,114)..... 12,962,654
----------------
Net Unrealized Appreciation on Investments During the Period.................................. 22,391,711
----------------
Net Realized and Unrealized Gain on Investments............................................... $ 16,281,723
================

Net Increase in Net Assets from Operations.................................................... $ 28,678,987
================
</TABLE>

10 See Notes to Financial Statements

Statement of Changes in Net Assets

For the Years Ended October 31, 1995 and 1994
- -------------------------------------------------------------------------------------------------------

Year Ended Year Ended
October 31, 1995 October 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.............................................. $ 12,397,264 $ 12,768,777
Net Realized Loss on Investments................................... (6,109,988) (8,339,649)
Net Unrealized Appreciation/Depreciation on Investments During the
Period............................................................. 22,391,711 (23,291,649)
---------------- ----------------
Change in Net Assets from Operations .............................. 28,678,987 (18,862,521)
---------------- ----------------
Distributions from Net Investment Income:
Common Shares.................................................... (9,446,665) (10,140,849)
Preferred Shares................................................. (3,692,258) (2,640,060)
---------------- ----------------
(13,138,923) (12,780,909)
---------------- ----------------
Distributions from Net Realized Gain on Investments (Note 1):
Common Shares.................................................... -0- (362,025)
Preferred Shares................................................. -0- (76,733)
---------------- ----------------
-0- (438,758)
---------------- ----------------
Total Distributions................................................ (13,138,923) (13,219,667)
---------------- ----------------
Net Change in Net Assets from Investment Activities................ 15,540,064 (32,082,188)

Net Assets:
Beginning of the Period............................................ 227,749,691 259,831,879
---------------- ----------------
End of the Period (Including undistributed net investment income
of $501,388 and $1,243,047, respectively).......................... $ 243,289,755 $ 227,749,691
=============== ===============

</TABLE>

11 See Notes to Financial Statements

Financial Highlights

The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- ------------------------------------------------------------------------------------------------------
January 22, 1993
Year Year (Commencement
Ended Ended of Investment
October 31, October 31, Operations) to
1995 1994 October 31, 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period <F1>............ $ 12.284 $ 15.253 $ 13.808
----------- ------------ ----------------
Net Investment Income.................................. 1.147 1.181 .803
Net Realized and Unrealized Gain/Loss on Investments... 1.507 (2.927) 1.329
----------- ------------ ----------------
Total from Investment Operations......................... 2.654 (1.746) 2.132
----------- ------------ ----------------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders.......................... .874 .938 .547
Common Share Equivalent of Distributions Paid to
Preferred Shareholders............................. .342 .244 .140
Distributions from Net Realized Gain on
Investments (Note 1):
Paid to Common Shareholders................ ......... -0- .034 -0-
Common Share Equivalent of Distributions Paid to
Preferred Shareholders............................. -0- .007 -0-
----------- ------------ ----------------
Total Distributions...................................... 1.216 1.223 .687
----------- ------------ ----------------
Net Asset Value, End of the Period....................... $ 13.722 $ 12.284 $ 15.253
=========== =========== ================

Market Price Per Share at End of the Period.............. $ 11.875 $ 10.750 $ 14.625
Total Investment Return at Market Price
(Non-Annualized) <F2>.................................. 18.79% (20.83%) 8.26%
Total Return at Net Asset Value (Non-Annualized) <F3>.... 19.39% (13.59%) 12.82%
Net Assets at End of the Period (In millions)............ $ 243.3 $ 227.7 $ 259.8
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (Annualized)............................. 1.77% 1.61% 1.49%
Ratio of Expenses to Average Net Assets (Annualized)..... 1.06% .99% 1.02%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (Annualized) <F4>.......... 6.14% 6.76% 5.97%
Portfolio Turnover....................................... 74.67% 165.20% 114.39%

<FN>
<F1> Net asset value at January 22, 1993, is adjusted for common and preferred
share offering costs of $.217 per common share.

<F2> Total investment return at market price reflects the change in market
value of the common shares for the period indicated with reinvestment
of dividends in accordance with the Trust's dividend reinvestment
plan.

<F3> Total return at net asset value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.

<F4> Net investment income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.

</TABLE>

12 See Notes to Financial Statements

Notes to Financial Statements

October 31, 1995
- --------------------------------------------------------------------------------

1. Significant Accounting Policies
Van Kampen Merritt Strategic Sector Municipal Trust (the "Trust") is registered
as a nondiversified closed-end management investment company under the
Investment Company Act of 1940, as amended. The Trust commenced investment
operations on January 22, 1993.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements.

A. Security Valuation -- Investments are stated at value using market
quotations or, if such valuations are not available, estimates obtained
from yield data relating to instruments or securities with similar
characteristics in accordance with procedures established in good faith
by the Board of Trustees. Short-term securities with remaining maturities
of less than 60 days are valued at amortized cost.

B. Security Transactions -- Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At October 31, 1995, there were no
when issued or delayed delivery purchase commitments.

C. Investment Income -- Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of
each applicable security.

D. Organizational Expenses -- The Trust has reimbursed Van Kampen American
Capital Distributors, Inc. or its affiliates (collectively "VKAC") for costs
incurred in connection with the Trust's organization and initial registration
in the amount of $40,000. These costs are being amortized on a straight line
basis over the 60 month period ending January 21, 1998. Van Kampen American
Capital Investment Advisory Corp. (the "Adviser") has agreed that in the
event any of the initial shares of the Trust originally purchased by VKAC
are redeemed during the amortization period, the Trust will be reimbursed
for any unamortized organizational expenses in the same proportion as the
number of shares redeemed bears to the number of initial shares held at the
time of redemption.

Notes to Financial Statements (Continued)

October 31, 1995
- --------------------------------------------------------------------------------

E. Federal Income Taxes -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 1995, the Trust had an accumulated capital loss
carryforward for tax purposes of $14,449,637, of which $8,339,649 and
$6,109,988 will expire on October 31, 2002 and 2003, respectively.

F. Distribution of Income and Gains -- The Trust declares and pays dividends
from net investment income to common shareholders monthly. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for
tax purposes.

2. Investment Advisory Agreement and Other Transactions with Affiliates
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly of .65% of the average net assets of the Trust. In addition, the Trust
will pay a monthly administrative fee to VKAC, the Trust's Administrator, at an
annual rate of .15% of the average net assets of the Trust. The administrative
services provided by the Administrator include record keeping and reporting
responsibilities with respect to the Trust's portfolio and preferred shares and
providing certain services to shareholders.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
For the year ended October 31, 1995, the Trust recognized expenses of
approximately $18,100 representing VKAC's cost of providing accounting and legal
services to the Trust.
Certain officers and trustees of the Trust are also officers and directors of
VKAC. The Trust does not compensate its officers or trustees who are officers of
VKAC.
The Trust has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC. The Trust's liability under the
deferred compensation and retirement plans at October 31, 1995, was
approximately $24,300.
At October 31, 1995, VKAC owned 6,700 common shares of the Trust.

Notes to Financial Statements (Continued)

October 31, 1995
- --------------------------------------------------------------------------------

3. Investment Transactions
Aggregate purchases and cost of sales of investment securities, excluding
short-term notes, for the year ended October 31, 1995 were $173,381,278 and
$188,323,826, respectively.

4. Derivative Financial Instruments
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
All of the Trust's portfolio holdings, including derivative instruments, are
marked to market each day with the change in value reflected in the unrealized
appreciation/depreciation on investments. Upon disposition, a realized gain or
loss is recognized accordingly, except for exercised option contracts where the
recognition of gain or loss is postponed until the disposal of the security
underlying the option contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.

A. Option Contracts -- An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
Transactions in options for the year ended October 31, 1995, were as follows:

<TABLE>
<CAPTION>
Contracts Premium
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1994...................... -0- $ -0-
Options Written and Purchased (Net).................. 2,500 (1,381,909)
Options Terminated in Closing Transactions (Net)..... (900) 658,832
Options Expired (Net)................................ (1,600) 723,077
--------- --------------
Outstanding at October 31, 1995...................... -0- $ -0-
========= ==============

</TABLE>

B. Futures Contracts -- A futures contract is an agreement involving
the delivery of a particular asset on a specified future date at an agreed
upon price. The Trust generally invests in futures on U.S. Treasury Bonds
and the Municipal Bond Index and typically closes the contract prior to the
delivery date. These contracts are generally used to manage the portfolio's
effective maturity and duration.

Notes to Financial Statements (Continued)

October 31, 1995
- --------------------------------------------------------------------------------

The fluctuation in market value of the contracts is settled daily through a
cash margin account. Realized gains and losses are recognized when the contracts
are closed or expire.
Transactions in futures contracts for the year ended October 31, 1995, were as
follows:

<TABLE>
<CAPTION>
Contracts
- --------------------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1994...................................... 2,523
Futures Opened....................................................... 6,350
Futures Closed....................................................... (8,673)
---------
Outstanding at October 31, 1995...................................... 200
=========
</TABLE>

The futures contracts outstanding as of October 31, 1995, and the description
and unrealized depreciation are as follows:

<TABLE>
<CAPTION> Unrealized
Contracts Depreciation
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bond Futures
Dec 1995-Sells to Open................................. 200 $ 614,114
======== ============
</TABLE>

C. Indexed Securities -- These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.
An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short term interest rates which it
pays on its preferred shares.

5. Preferred Shares
The Trust has outstanding 1,900 Auction Preferred Shares ("APS") in two
series. Series A contains 1,000 shares while Series B contains 900 shares.
Dividends are cumulative and the dividend rate for both Series is currently
reset every 28 days through an auction process. At October 31, 1995, the
average rate in effect was 3.744%. During the year ended October 31, 1995,
the rates ranged from 3.274% to 4.500%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of Preferred Share Maintenance
expense.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $50,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.

Independent Auditors' Report
- --------------------------------------------------------------------------------

The Board of Trustees and Shareholders of
Van Kampen Merritt Strategic Sector Municipal Trust:

We have audited the accompanying statement of assets and liabilities of Van
Kampen Merritt Strategic Sector Municipal Trust (the "Trust"), including the
portfolio of investments, as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Van
Kampen Merritt Strategic Sector Municipal Trust as of October 31, 1995, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP
Chicago, Illinois
December 11, 1995

Dividend Reinvestment Plan
- --------------------------------------------------------------------------------

The Trust offers a Dividend Reinvestment Plan (the "Plan") pursuant to which
Common Shareholders who are participants in the Plan may have dividends and
capital gains distributions automatically reinvested in Common Shares of the
Trust. All Common Shareholders are deemed to be participants in the Plan
unless they specifically elect not to participate. Common Shareholders who
elect not to participate in the Plan will receive all distributions
of dividends and capital gains in cash paid by check mailed directly to the
Common Shareholder by the Trust's dividend disbursing agent.

How the Plan Works
State Street Bank and Trust Company, as your Plan Agent, serves as agent for
the Common Shareholders in administering the Plan. After the Trust declares a
dividend or determines to make a capital gains distribution, the Plan Agent
will, as agent for the participants, receive the cash payment and use it to
buy Common Shares in the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. The Trust will not issue any new
Common Shares in connection with the Plan. All reinvestments are in full and
fractional Common Shares, carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
change sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.

Costs of the Plan
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.

Tax Implications
You will receive tax information annually for your personal records and to help
you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.

Right to Withdraw
All Common Shareholders of the Trust are deemed to be participants in the Plan
unless they specifically elect not to participate. You may withdraw from the
Plan at any time by calling 1-800-341-2929 or by writing State Street Bank and
Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will
receive, without charge, a share certificate issued in your name for all full
Common Shares credited to your account under the Plan and a cash payment will be
made for any fractional Common Share credited to your account under the Plan.
You may again elect to participate in the Plan at any time by calling
1-800-341-2929 or writing to the Trust at:

One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attn: Closed-End Funds

Funds Distributed by Van Kampen American Capital
- --------------------------------------------------------------------------------

GLOBAL AND INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund

EQUITY
Growth
Emerging Growth Fund
Enterprise Fund
Pace Fund
Growth & Income
Balanced Fund
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund

FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income

TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Limited Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
Texas Tax Free Income Fund

THE GOVETT FUNDS
Emerging Markets Fund
Global Income Fund
International Equity Fund
Latin America Fund
Pacific Strategy Fund
Smaller Companies Fund

Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us direct at 1-800-421-5666 weekdays
from 7:00 a.m. to 7:00 p.m. Central time.

Van Kampen Merritt Strategic Sector Municipal Trust
- --------------------------------------------------------------------------------

Officers and Trustees

Don G. Powell*
Chairman and Trustee

Dennis J. McDonnell*
President and Trustee

David C. Arch
Trustee

Rod Dammeyer
Trustee

Howard J Kerr
Trustee

Theodore A. Myers
Trustee

Hugo F. Sonnenschein
Trustee

Wayne W. Whalen*
Trustee

Peter W. Hegel*
Vice President

Ronald A. Nyberg*
Vice President and Secretary

Edward C. Wood, III*
Vice President and Treasurer

Scott E. Martin*
Assistant Secretary

Weston B. Wetherell*
Assistant Secretary

Nicholas Dalmaso*
Assistant Secretary

John L. Sullivan*
Controller

Steven M. Hill*
Assistant Treasurer

Investment Adviser

Van Kampen American Capital Investment Advisory Corp.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181

Custodian and
Transfer Agent

State Street Bank
and Trust Company
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606

Independent Auditors

KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601

* "Interested" persons of the Trust, as defined in the Investment
Company Act of 1940.

SM denotes a service mark of
Van Kampen American Capital Distributors, Inc.